Where does the Dollar go from here?

EUR/USD

Well a happy Monday to all of you. The Euro has steadily dropping but we are still seeing the Euro bulls put up some good fights. We’ve seen 3 days of some strong rallies now and the pair has now breached the 4700 mark. Daily stochastics shows signs of more bullish movements as it is trending up nicely. 4hr stochastics are also trending up but are deep into overbought territory which could mean a short term drop. The 100 and 200 SMA on the 4hr chart have formed an upper and lower bound for the pair and it looks like we may see the Euro travel up to its 100 SMA at around 4740 before it begins to bounce back down.

GBP/USD

Well if anyone saw the Mayweather vs. Hatton fight, you know that the American was able to knock down the Brit in the 10th round. If anyone was watching the Cable, you know that the British Pound has been knocking down the American Dollar! We’ve seen 3 straight trading sessions of Sterling gains and now the pair is trading right around 2.0450. Daily stochastics show signs of more Sterling rallies as it is trending up nicely right above the oversold territory. However, 4hr stochastics are in overbought territory and have seemed to form a bearish hidden divergence. While the Sterling may be beating the Dollar at this point, I would look for the Dollar to fight back and knock the Pound back down by following in Mayweather’s footsteps…..jab-jab-hook, UPPERCUT!

USD/CHF

Unlike the Euro and Cable, the Swissy has been undecided the past few days. The pair has been trading right around the 1300 and can’t seem to make up its mind from there. 4hr stochastics are trending up while daily stochastics are trending down in overbought territory. So you can see, even the technical indicators are showing signs of confusion. We are also seeing an upper and lower bound being formed by the 200 and 100 SMA on the 4hr chart. If this pattern continues, look for the Swissy to consolidate even further, which should lead to a breakout later on in the week.

USD/JPY

The Dollar has been rising against the Yen the past few days, but it looks like we may see another major drop. On the daily chart we are seeing a nice bearish hidden divergence. 4hr stochastics also happens to be trending down (albeit only slightly). I would look for the Dollar to hit resistance at its 50 EMA on the daily chart at around 112.35 followed by a sharp drop from there.

I’m not really big into fundamentals but I feel that they are important to discuss. In this section I will be posting fundamental tidbits that I find interesting from various sources. If you find an article that you think would benefit everyone, please email me (Big Pippin) with your username, the article, and a link to where members can read the entire article.

Now onto the Fundamentals:
  • Fed Forecasts Slower Growth and More Out of Work Next Year
    • The housing collapse and credit crisis will slow economic growth and nudge up unemployment next year, the Federal Reserve said Tuesday in a first-of-its-kind forecast that some economists believe will lead to interest rate cuts early in 2008.
  • Bernanke Sees Slower US Growth
    • Federal Reserve Chairman Ben Bernanke said Thursday that a host of economic problems, including the severe housing slump, will cause business growth to slow noticeably in coming months. Bernanke told Congress’ Joint Economic Committee that the central bank is watching developments closely, but gave no signal that it’s prepared at the current time to cut interest rates even further. He stressed that the central bank was keeping all options open, saying the Fed would be closely watching economic growth and the threat of inflation.
  • "Model Behavior"
    • Super Model Gisele Bundchen has decided that she wants to remain the world’s richest model by insisting that she be paid in almost any currency but the U.S. dollar! OK… Now the dollar has been officially dissed! Sure guys like Rogers, Buffett, Gross, Butler, Wiggin, and Bonner have dissed the dollar because of the fundamentals… But when a super model decides to side with us, well then we’ve got ourselves what I’ll call… "Model Behavior"!\
News events to watch for tomorrow :
  • 5:00am EDT- German ZEW Economic Sentiment
  • 2:15pm EDT– US Interest Rate Statement

For a list of all of tomorrow’s news events, check out our Forex Calendar